The pressure of the competent state ministry on the Belgrade Airport company after problems related to the lack of manpower and the consequences in the form of a large number of delayed flights reached the third level the day before yesterday in just three weeks – the Ministry of Construction, Transport and Infrastructure will initiate a tender for the fourth and fifth handling operator at „Nikola Tesla“ airport.
What is behind such a decision, in what way and how quickly can it help solve problems in this summer season, and what does the largest private handling operator, SkyPartner, think about it?
As the Minister of Transport Goran Vesić wrote on his Twitter profile on Sunday, the ministry will, as he states, “as a matter of urgency, order the Directorate of Civil Aviation to call for a tender for new operators of ground operations at Nikola Tesla Airport, which Serbia has the right to do according to concession agreement with Vansi”. Vesić explains the decision as a future prevention of flight delays and congestion because, as he writes, “there are not enough workers in the baggage sorting office”:
Each airline chooses its own ground operator, so I believe that competition will help Vansi to be more successful and correct the mistakes that are the result of their understanding that nobody can do anything to them since they are monopolists.
The state respects the Vansi company as one of the largest in the world, but Vansi has an obligation to ensure that the airport services work flawlessly and that the passengers who paid for the tickets, as well as their airport service, get what they paid for.
The number of flights and passengers increased significantly, which was expected, and they had to be ready for the summer season. Unfortunately, they were not, and because of that, as a minister, I was motivated to find a solution that would allow passengers’ interests to be maximally protected.
Belgrade Airport had almost 3.5 million passengers this year and will have 7 million by the end of the year, which is a historical record. – Vesić wrote, in order to visit the airport again yesterday, to announce the formation of an “operational team” that will monitor the situation daily, as well as that DCV will soon call for a tender for “at least two new handling operators”. The idea is also to set up gates at the outgoing passport control for service electronic passport control, which, as the minister said, requires a change in the regulations.
Third round of pressure
The day before yesterday’s announcement by the Minister of Transport comes after his two public (and yesterday’s third) meetings with the representatives of Vansi, with an additional meeting with the director of Vinci Airports, which served, most likely, as the only possible pressure tool due to the current situation. Was the minister’s decision influenced by the fact that Vansi’s parent company is listed on the French stock exchange and is therefore sensitive to negative media headlines (the trend of bad news about business scares investors who either sell shares or don’t buy them, which reduces the value of shares) or was it simply the only move the state could take in this specific situation?
We cannot fully answer this question since the technical aspects of the concession contract have not been made public. During the previous years, the only thing we learned was that Vansi fought to limit the growth of traffic volume at other Serbian airports, which should not represent a concrete physical ban on growth. If, for example, Niš exceeds the figure of one million passengers per year, most likely, the concession fee will be recalculated and its reduction in favor of Vansi.
Vesić’s initiative now actually reveals another element of the contract. In the statement, the Minister also says: “…tender for new operators of ground operations at Nikola Tesla Airport, which Serbia has the right to according to the concession agreement with Vansi…”, which reveals that the state did not leave Vansi influence on the determination of the number of companies that can receive a license for serving passenger planes.
In addition to public pressure, which is still probably the only reason for this initiative, the introduction of the fourth and fifth handling operator (who has a license to manipulate luggage on the platform and accompanying equipment) may be a more concrete threat to Vansi that Air Serbia, as their most important and largest client , could transfer to someone else, when that other enters this market and gets a work permit. Vansi and the national airline have a strategic relationship and, most likely, the concession agreement regulates the protection of the national airline in certain segments of (more favorable) business. Such protection is understandable since it is the physically largest airline on “Nikola Tesla” (with about 55% market share) and it is natural that it can fight for more favorable conditions as the largest single payer of (not only handling) services.
Vesić’s initiative is certainly positive from the point of view of additional market liberalization for “Nikola Tesla”. If the Belgrade airport achieves the announced seven million passengers this year, it means that, according to previously announced projections, the volume of passenger traffic (cargo traffic is also constantly growing) will more than double by the end of the concession in 2043. So there will be work for one or two more handling companies.
The initiative will certainly not result in an improvement of the situation during this summer season (which in air traffic lasts from April to November) because it is almost impossible that any foreign company will be able to start operations quickly enough and have a positive impact this year. Another airport handler, the private company SkyPartner, took two years to organize its operations and start operations.
The winner of the fourth (and fift”) license will certainly be a foreign company, since there is neither capital in Serbia that is exclusively oriented towards investing in this type of business, nor is there local knowledge of the business processes of this specific activity (without that person already possessing one of the licenses ). A foreign company, as in the case of SkyPartner, will probably bring capital and “know-how” and form a Serbian d.o.o. which will be the operative venture.
A foreign company, even If by some procedural-business miracle it starts its operations in record time, will not be able to solve the lack of physical workers who directly serve the planes and work in the baggage sorting room by bringing them with them from abroad. Foreigners can be employed as manual workers on the platform, but they must have a registered residence in Serbia, which is not complicated. A more complicated aspect of approving their employment and the ability to move around the restricted area of the airport (working around the plane is, in terms of access, crossing the state border) is obtaining a positive security check, since the security authorities cannot quickly and meaningfully check foreigners.
What does the competition think about everything?
As the director of the SkyPartner company Vladimir Trifunović told the Tango Six portal, they welcome the initiative of the Minister of Transport and consider that the competition is welcome. In June 2016, as Tango Six reported at the time, SkyPartner started handling operations on “Nikola Tesla” after receiving a permit in the tender by DCV. If anyone knows how difficult it was to break through the then state monopoly for this type of extremely specific business, it is SkyPartner. The company currently has 210 employees.
As a handling company that offers aircraft servicing services at the “Nikola Tesla” airport for 11 airlines, from our experience the only solution and way out of the current situation is the additional employment of labor by the airport operator, since this is the biggest bottleneck that after affects traffic realization and passenger satisfaction.
Although the initiative of Minister Vesić is positive from a market point of view, attention should be drawn to the physical conditions at the airport for enabling the work of a potential fourth or fifth company. Currently, there are not enough accommodation capacities for people or equipment, since this was not taken into account during the reconstruction and design of new facilities at the airport.
SkyPartner, although it does not support the national airline company, has an extremely positive view of their growth, and we believe that it is in everyone’s interest that the backbone of the development of the Belgrade airport is precisely the strong Air Serbia. If another handling company were to start working on “Nikola Tesla” and if Air Serbia wanted to sign a service contract with it, that procedure could not be faster than three to four months. – says Trifunović for Tango Six.
Investment in people as well as equipment
The Directorate of Civil Aviation, as the national aviation regulator, currently approves the work of 14 business entities that serve passenger and other commercial aircraft in various ways and through different categories on the platform of the airport “Nikola Tesla”. Some of these companies are only engaged in towing aircraft, some only serve mail and passengers, some have full licenses with approval to perform all service operations, which, important for this story, include the reception and shipment of baggage.
Many of these companies are “paper tigers” that have a small number of employees and do not, in some cases, have the equipment to perform even the activities for which they have declared themselves. The DCV permit, of course, does not oblige or compel the company to perform specific business activities.
In addition to people, the most important business segment of a handling company is equipment. In this case, for loading and sorting passenger luggage / Photo: SkyPartner
In the real business dynamics at “Nikola Tesla”, only the companies Belgrade Airport and SkyPartner, in addition to the permit, have people (Belgrade Airport, as we have seen this season, not enough) and specific equipment for handling luggage. This equipment (tractors and luggage trailers, conveyor belts, “push-back” vehicles) represents a significant capital investment and is the only one owned by the mentioned two companies at the Belgrade airport, according to the number of large clients in the form of airlines.
Almost all political parties and professional managements that managed the last two iterations of the national airline had the (correct) business philosophy of outsourcing operations that do not represent the core business of the airline. Thus, in 2005, Jat Tehnika, formerly catering, was separated, and in 2017, Air Serbia separated its organizational unit “ASGS”, which dealt with the servicing of its planes and whose staff and operations were merged with the then joint-stock company “Aerodrom Nikola Tesla”, i.e. today’s to the Belgrade Airport company. “ASGS” still retains its separate handling permit.
Vansi, i.e. the Belgrade Airport company, will certainly not think of losing its biggest client, Air Serbia. Air Serbia, depending on which and how big a foreign company is interested in entering the market as the fourth (and fifth) handler, and before the start of operations of this company, will probably receive an attractive offer from it. Because otherwise, it will not be in the interest of that large foreign company to enter the market, invest significant financial resources in people (if it finds them) and equipment if it does not secure Air Serbia as a client in advance.
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